September 16, 2007

2007 Mortgage Crisis – The Coffee Table Photo Book (Page 2)

Filed under: Bailout,Mortgage Bailout — labordaytheses @ 12:34 am

How could it all have gone so terribly wrong?

< /sarcasm >



September 10, 2007

American opposition to a taxpayer bailout of reckless real estate speculators

Couple people asked for this in the discussion of NINJA loans over at Barry Ritholtz’s blog.

Original Opinion Dynamics/Fox News poll showing 70% opposition to a bailout of “homeowners” and 80% opposition to a bailout of brokers and banks is here.

Some anecdotal evidence showing even higher opposition here in SoCal is here and here.


September 8, 2007

Mortgage Bailout Scam question of the day

Via Nourial Roubini’s blog:

These are some of the complex and difficult issues that analysts and policy makers are starting to address. Bill Gross of Pimco is now proposing the creation of a fiscal institution like the RTC (that resolved the S&L banking crisis of the late 1980s and early 1990s) – what he called the Reconstruction Mortgage Corporation – to resolve the subprime credit problems. While this may sound as a fiscal bailout of borrowers (and by default of lenders) the alternative in his view is destructive home price deflation (as much as 10% fall in home prices in his view) and million of homeowners ending up in foreclosure. Folks at Goldman Sachs are actually predicting that home prices will fall as much as 15% in the next few years before they bottom out.

Home prices in my neighborhood in Southern California increased, on average, more than 150% between 2001 and 2006, with no corresponding increase in average income. Can someone please tell me why > 25% YOY gains for 5 years straight is considered peachy, but a subsequent 10% decline is a disaster of such epic proportions that it merits the biggest bailout in government history?

September 3, 2007

Ant’s Labor Day Theses

From: The Worker Ants of the U.S. Economy

To: The Grasshoppers and Ruling Class Politicians who support them



  • Calling people who got 110% LTV interest-only loans to buy houses “homeowners” is ridiculous and insults the intelligence of anyone who can count.
  • The correct term for these people is “over-leveraged real estate speculators”
  • Calling financial services conglomerates that issued 110% LTV interest-only loans to people who couldn’t possibly repay them unless prices continued to skyrocket “distressed lenders” is equally ridiculous.
  • The correct term for these institutions is “over-leveraged real estate speculators”

Politics – New Rules

  • Politicians currently stumbling all over themselves to get on tv to talk about their shock and dismay with “reckless”, “irresponsible” and predatory lending are required to state at the outset of any interviews their reason for not being concerned with this problem back when there was still time to actually do something about it.
  • Politicians from New York and New York bedroom communiities are not allowed to demagogue on behalf of “homeowners”, period, without first returning all campaign contributions from hedge fund managers who live in their districts.
  • Senator Chris Dodd, in particular, must make the following truth in advertising disclaimer prior to all public comments on the subject of subprime lending. “My name is Chris Dodd and I’m a whore for the financial services industry.
  • While we’re at it, it would save a lot of time if politicians just wore sports jerseys naming their corporate sponsors (like Nascar drivers do) to make it easier to tell who they work for.

The Economy

  • At it’s root the “mortgage crisis” is nothing more than an affordability crisis.  Put simply, people with good jobs, good savings and good credit can no longer afford to purchase a home in many parts of this country without taking on a suicide loan.
  • There are exactly two ways this situation can be corrected in a free market – prices have to drop or incomes have to rise.  A lot.
  • Contrary to popular belief, a housing price contraction is one of the best possible things that could happen for the long term health of the American economy.
  • Those who dispute that fact please answer this question:  pretend you’re a 30 year old software engineer (one of the few industries where America still makes something that the rest of the world wants to buy, and has a positive balance of trade) working in Silicon Valley and competing with engineers in Bangalore and Bulgaria who can live handsomely on $10/hr.  Does being forced to pay 1 million dollars for a starter home make you more or less competitive in the global economy?

My response to “Loan Bailouts a Hard Sell”

I wrote this in response to the John Lasner’s Friday column in the OC Register. The comment board there would not allow me to post it, so I decided to share my rant here instead 😉

His message to “Angry Renters” was:

“If housing’s too expensive for your wallet, don’t root against those who had the nerve to play the game… in many cases it” (taking out suicide loans, lying about income and assets to qualify for a bigger loan, etc.) was “a noble error”


So people who lied and chose to play Russian Roulette with their family’s financial future were “noble” while those who didn’t were chickens who didn’t have “the nerve to play the game?”

That’s both untrue and incredibly insulting.

Real nobility, sir, is being a responsible adult and parent. Nobility is looking your young daughter in the eye when she asks you why she has to live in an apartment when all of her friends live in houses with yards and saying “because we just can’t afford it right now.”

Nobility is explaining to your wife why you can’t afford to buy a house when all of your friends can “afford” it (and seem to be getting rich in the process.) It’s bearing the look of disappointment on her face while she tries to reconcile the words with the emotional reality that her husband works 80+ hours a week – so hard that she never really gets to see him – yet for some reason is unable to provide the home that everyone else around her seems to be able to “afford.” It’s protecting the best interests of your family by sticking to what you know to be true rather than succumbing to the siren song of easy money and getting to look like a hero to your family based on a lie.

Nobility is taking responsibility for your life and planning for the future; telling your wife that the numbers don’t lie, that the “affordability” of ARMs and NINJA mortgages is an illusion, and that when rates reset in a couple of years, the speculators will have to bail out, and you’ll be able to find a home for your family that you can afford without taking out a suicide loan and endangering your family’s future in the process.

Nobility is being an adult. Facing up to hard facts. Telling the truth, even when its painful. Last but not least, it’s rolling up your sleeves and working hard to build honest prosperity for your family rather than thinking you’re entitled to easy money and a life of leisure through engineered asset inflation.

I’m not at all surprised you think it’s a good idea for the government to take the money I’ve worked very hard to save as a down payment on my family’s future, and use it to prop up the value of your wildly overinflated asset, but please spare me the flowery language while you rob me – – it’s an insult to every responsible person reading.

I don’t wish anyone ill, even real estate speculators. I’m also not looking for a handout. I just want a fair shake at a fair market, free of massive credit distortions created by government and wealthy entrenched interests. Is that really too much to ask?

ps – the “logical” arguments you present in your column are every bit as specious as the emotional ones. I’ll cover those next.


Links round-up

Filed under: Mortgage Bailout,Politics,Real Estate Speculators,VA mortgage — labordaytheses @ 6:04 am

The Bush speech

Investors default on outsize share of home loans. I’m shocked.

Ginnie Mae removes loan limit on VA mortgages. Very few people (myself included) will have any criticism of more generous benefits being extended to our veterans (though it seems like providing adequate body armor and a paycheck sufficient to keep military families off of food stamps might be a more productive place to start.) I think the timing of this announcement tells you everything you need to know about the real agenda.

The New Money Pit

The Punch Bowl Caucus

Wow, even the crowd at Michele Malkin’s blog is pissed off.

Voice an opinion

Should the federal government bailout subprime borrowers? (MSNBC)

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